Look Elsewhere

Global REITs could provide a safe haven during turbulent economic times in the U.S., according to Boston-based Torto Wheaton Research. The group praised REITs for continuing to outperform other equities and offering attractive valuations for those seeking alternatives to direct investment in real estate.

“The global REIT market today [contains] some of the largest, most liquid, pure play real estate companies; they have some of the finest properties in the world,” said W. Steve Carroll, managing director and co-chief investment officer for global real estate securities with CB Richard Ellis.

The research firm said that global REIT stocks have offered returns of up to 14 percent on a five-year basis through August 2008 versus returns of approximately 11 percent for global equities and 4 percent for bonds. On a risk-adjusted basis, REITs have produced returns of 0.6 percent per month over a 10-year period compared to 0.1 percent per month for both equities and bonds.

Part of the reason for the attractiveness of REITs is the diversity that can be attained. Carroll estimates a $2 million investment spread between REITs could provide exposure to 60 companies across all real estate sectors spanning 13 countries around the world and more than 3,000 institutional real estate properties. To achieve comparable exposure through direct investment would require more than $1 billion, he said.

The drop in REIT prices over the past year makes REITs all the more attractive. “As we look at [real estate] fundamentals across the globe, we see them as pretty solid,” said Raymond Torto, global chief economist at Torto Wheaton.